It’s been one of those weeks when I am still trying to wrap my brain around the news of an emission scandal within Volkswagen (VW) that has impacted a number of diesel vehicles sold in the U.S. since 2009. It appears that these vehicles have what some call a defeat device that has internal software designed to sense when the emissions testing feature is turned on. Subsequently, this turns on equipment that reduces emissions. When the vehicle is not being tested for emissions, it exhibits better fuel economy and performance, but produces significantly more pollutants, according to EPA officials.
This illegal technique allowed VW to make their cars look and perform better than they actually did. It also has huge impacts for members in the STEM and business communities. According to Damien McGuinness of the BBC’s Berlin outlet, “Cars and the environment are two things that Germany cares so deeply about that they form part of the national character.”
One German newspaper has called it the “most expensive act of stupidity in the history of the car industry”. Stupid because manipulating pollution data to boost sales can only be seen as a slap in the face to customers who paid a premium for what they thought was a greener car.
Here are some of the numbers behind the company’s current woes:
- 1: VW is “currently” the Number 1 car maker in global sales.
- 500,000: vehicles thought to be affected in the U.S.
- 11,000,000: diesel cars worldwide thought to be equipped with faulty software
- 7: American models with the affected engines that will be recalled (including the Audi A3)
- 2 liter: size of engine impacted, also known as Type EA 189 engines
- 0: cars currently being sold with this engine in the U.S. because VW has halted sales
- 25%: of cars sold in Europe bear the VW brand
- 5 Billion Euros: or about $7.3 billion has been set aside to fix the issue. This amount is 50% of VW’s annual profit.
- 40X: When the emissions device is turned off, 40X more nitrogen oxide could be emitted than the law allows.
- 20%: drop in shares thru Tuesday, September 22, 2015 since news of the emissions woes began.
- $18 billion in potential fines: or $37,500 per car that did not comply with legal standards
- Unknown: numbers of lawsuits that may be filed as a result of this breach of contract and confidence in the German automaker
- Unknown $s: cost of unknown lawsuits
- 1: Ex-CEO – CEO Martin Winterkorn has resigned over the company’s manipulation of diesel. [This post was amended on 09.23.2015 to reflect this new development.]
The emissions scandal raises longer-term issues for the company:
- the reputation of the car maker’s top management.
- its image in the U.S., where VW sales are weak.
- the credibility of the auto industry at large.
- impact on VW’s 592,586 employees globally.
It now appears that the defeat device that seemingly was such a bright idea, is not so bright after all. It probably goes without saying that trust and belief in the VW brand has been broken.
References used for this post:
- How Volkswagen Got Away With Diesel Deception, by Guilbert Gates, Josh Keller, Karl Russel and Derek Watkins, International Section, September 22, 2015, http://www.nytimes.com/interactive/2015/09/22/business/international/vw-volkswagen-emissions-explainer.html
- VW emissions scandal hits 11m vehicles, BBC Business, September 22, 2015, http://www.bbc.com/news/business-34325005